The market’s first reaction to Trump’s and the Republican party’s victory in the US election was in line with expectations that their policies would lead to higher inflation in the medium term, as well as providing a certain boost to short-term economic growth.

The Spanish economy is maintaining a good tone as 2024 draws to a close. The labour market is performing well despite the slight slowdown in November; inflation is picking up, driven by the most volatile components; the current account surplus continues to grow, and home sales are soaring.

The latest available economic indicators suggest that the trends observed for much of 2024 remain in place as the year draws to a close: buoyancy and resilience in the US, weakness in the euro area due to the delicate situation in Germany and France, and a lack of momentum in the Chinese economy in the absence of decisive economic stimuli.

Portugal’s National statistics Institute confirmed that the economy grew by 0.2% quarter-on-quarter in Q3 (1.9% year-on-year), with a significant contribution from domestic demand, highlighting the strength of private consumption.

In the coming years, the paths of interest rates and nominal GDP growth will create an environment in which it will not be so easy to regain fiscal space without a proactive effort by governments.

2025 is set to be a year of change between a world that has not quite died yet (globalisation, multilateralism, liberal democracies) and another that has not quite been born and which nobody knows what shape it will take.

The international economy showed remarkable resilience in 2024 and the available data suggest that world GDP may have grown slightly above 3%. The tailwinds that supported economic activity will likely continue to blow in 2025, albeit with less strength and in the face of significant challenges.

Spain’s GDP continued to record dynamic growth in Q3 2024 and the main indicators suggest this trend will continue in Q4. The strength of the labour market is boosting household incomes and inflation remains contained, despite the ongoing rebound.

The pandemic has led to cash being replaced by card payments, as shown by an analysis using anonymised internal CaixaBank data. This substitution effect is seen both at the aggregate level and at the sector level, particularly in purchases of food and durable goods.

Economic activity is showing signs of a slowdown and inflation fell below 2% in March for the first time since August 2024.

That being the case, for the moment, and while we wait for events to unfold, it seems that our economy ought to weather this period of uncertainty better than our main trading partners.

The surge in uncertainty and the tariff hikes introduce downside risks to global growth, as well as upside risks to US inflation, while the impact on prices for the rest of the world is much more uncertain. 

Trump’s tariffs deal a blow to investor risk appetite and sovereign yield curves steepen on both sides of the Atlantic, as the central banks try to navigate the tidal surge. The stock markets register high volatility and the commodities most dependent on the business cycle fall.

The AIReF has ruled that the pension spending rule agreed with the European Commission has not been violated, although it has pointed out that complying with this rule does not guarantee the sustainability of the pension system or that of the general government as a whole. Moreover, it has warned that it will be necessary to increase government transfers to the Social Security system in order to sustain it between now and 2050.

Portugal’s growth in the first quarter of the year fell short of expectations, shrinking 0.5% quarter-on-quarter according to the preliminary estimate of Portugal’s National Statistics Institute.

At least for now, and despite the depreciation it has accumulated so far this year, the value of the dollar does not appear to reflect any major change in the currency’s central role in the international monetary system.

In these first few months of the year, Spain’s GDP has continued to grow at a significant rate, although the gap between the services and industrial sectors persists. Job creation is gaining traction, while inflation continues to decline, driven by the fall in energy prices. The trade deficit continued to increase in February and residential activity in Spain has had the best start to the year since 2007.

This month, we have updated our forecast scenario for the Spanish economy. Although we now expect growth to be slightly lower than previously anticipated, the message remains broadly positive and there are several elements sustaining the Spanish economy’s dynamic growth.